The Walt Disney Company Financial Outcomes

The Walt Disney Company (Disney) is an American conglomerate best known for its theme parks and movies. Disney has operations in many other industries including sports and television; Disney owns the ESPN and ABC channels, for instance. In the theme park area, Disney has been making investments to expand domestically in California as well as overseas in Asia. According to Disney, the parks are the places where the company makes close emotional connections with its millions of customers in search of experiencing first-hand the magic of Disney (The Walt Disney Company, 2012). This paper looks at some of Disney’s recent financial investments, analyzes its positive and negative aspects, and makes projections on their benefit of the company.

Shanghai Theme Park Investment

Like other large companies, Disney has looked at Asia as a logical region in which to expand operations. Since 1989, Disney has been negotiating with China’s central government to build a theme park in Shanghai. With several off-again, on-again talks, Disney finally gained approval in 2009 (Barnes, 2009). In 2010 Disney initiated the construction of its new theme park in Shanghai and expects its completion by 2015 (Rapoza, 2013). Shanghai Disneyland will help the organization achieve significant growth in revenues and profits, key goals of its global strategy, because of the growing middle class in China.

The financial outcomes for this and other theme park expansion may include both positive and negative aspects. Internal and external factors will have an effect on whether the expansion of theme parks will succeed or fail. Some of these factors include management, capital, or shareholder support.

            Positives. Disney is an organization that does more business in China than other organizations so opening up a theme park in Shanghai will contribute to profits. Historically, Disney has been able to increase its revenues and profits thanks to adding more theme parks and attractions to its portfolio. For example, a significant portion of Disney’s 5% increase in revenues and 15% increase in profits during the fiscal year 2010 originated from its opening of the World of Color attraction at its California Adventure theme park. A similar positive impact on the top and bottom lines can be expected from the opening of Shanghai Disneyland. Revenues in this kind of facility come not only from the price of admission but also from the sale of memorabilia and other Disney merchandise.

            Negatives. Potentially negative impacts exist with the expansion of a theme park in Shanghai as well. In addition to the risk of poor management of resources and funding, there exists a measure of foreign exchange risk and political risk. Conversion of the US dollar to the Chinese Yuan shows how the Yuan is significantly undervalued versus the dollar; currently the exchange is at 1 USD to 6.2 RMB. This could result in a foreign exchange loss when translating payables and invoices pertaining to the project. Another negative factor is China’s treatment and policies against American companies.

            El ratio de deuda demuestra la proporción del total de activos que la compañía ha financiado por créditos. De acuerdo al balance anual de Disney para el período que termina el 31 de enero de 2012 su deuda total es de $98,144,000, total assets son $163,429,000 (The Wa;t Disney Company, 2012).  

La ecuación debt ratio es:
Debt ratio = Total Liabilities
                  Total Assets
El debt ratio de Disney es:
$98,144,000
$163,429,000 = 0.60 = 60%

            Esto significa que Disney ha financiado más de la mitad de sus activos con deuda. Esta es una proporción alta, por lo tanto el grado de endeudamiento de Disney, así como su influencia financiera es mayor. Otro ratio de deuda son los intereses devengados en relación a las ganancias antes de impuestos / intereses. Los intereses devengados en relación a las ganancias en proporción de Disney es de $18.435.000 / $ 1.900.000 = 9,7.  Esto es bueno para Disney, el interés ganado en proporción de 3 es decente y 5 es bueno.

           

 Los financial outcomes tienen una repercusión tremenda en el futuro de cualquier empresa. Las diferencias entre las ganancias y las perdidas, contribuyen a la vida de los financial outcomes.

References

Baran, M. (2010). World of Color kicks off Disneyland expansion. Retrieved from

http://www.travelweekly.com/Destinations2001-2007/World-of-Color-kicks-off-Disneyland- expansion/

Barnes, B. (2009). China approves Disney theme park in Shanghai. Retrieved from http://www.nytimes.com/2009/11/04/business/global/04disney.html

The Walt Disney Company, (2012). Fiscal Year 2012 Annual Financial Report and Shareholder Letter. Retrieved from  http://corporate.disney.go.com/investors/annual_reports.html  

Rapoza, K. (2013). Shanghai Disney to Open in 2015. Retrieved from http://www.forbes.com/sites/kenrapoza/2013/03/08/shanghai-disney-to-open-2015/